Bank Runs During the Great Depression

Topics: Great Depression, Wall Street Crash of 1929, Central bank Pages: 2 (623 words) Published: June 12, 2013
Bank Runs during the Great Depression
The Great Depression was one of the longest lasting economic declines in Western history, sparked by the stock market crash of 1929, and ending around 1939. During the Great Depression, there were many incidents of banks failing, For example, many banks experienced bank runs. These situations deeply affected the average citizen's confidence in the banking system.

Bank Runs severely crippled the banking system, and caused many banks to fold. During a bank run, many bank customers lose confidence in the system and quickly withdraw their money all at the same time (The Great Depression — History.com Articles, Video, Pictures and Facts). Since banks only have a small portion of the deposits at any one time, they have to dump all their financial assets, usually far below market rate, and cash in on their loans in order to pay the depositors (The Great Depression — History.com Articles, Video, Pictures and Facts). This process causes banks to lose a lot of money, and the amount of money lost may lead them to fail (The Great Depression — History.com Articles, Video, Pictures and Facts). Bank Runs weakened the economy, due to the fact that many of the deposits that were previously in the banks and used for investment was kept by the many depositors, as well as investor confidence being dampened by these events (Press 14). At the height of the bank runs, more than 1300 banks closed down (The Great Depression — History.com Articles, Video, Pictures and Facts). However, this crisis was ended with the passing of the "Emergency Banking Act", which allowed the Treasury Department to oversee the reopening of more than half of the banks that were previously closed (Press 14). The Treasury Department also insured the deposits of banks that were members of the "Federal Reserve System", giving customers newfound faith in the banking system (Press 14).

The effects of the bank runs can be indirectly found in To Kill a Mockingbird, when it...

Cited: The Great Depression — History.com Articles, Video, Pictures and Facts. A&E Television Networks, 2013. Web. 11 Feb. 2013. .
Lee, Harper. To Kill a Mockingbird. London: Arrow, 2010. Print.
Press, Petra. The 1930s. San Diego: Lucent, 1999. Print. A Cultural History of the United States through the Decades.
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